The Centers for Medicare and Medicaid Services’ (CMS’) decision to hold off on finalizing state use of federal upper limits (FULs) for reimbursement to pharmacy providers that fill prescriptionsfor Medicaid beneficiaries is a significant achievement for the National Association of Chain Drug Stores and its allies.

In a bulletin issued last November, CMS had advised stakeholders that in July of this year it would require states to begin calculating payments to community pharmacies serving Medicaid patients with revised average manufacturer price-based federal upper limits (FULs).

The plan set off alarm bells among providers. In response to draft FULs released by the government, some in the industry asserted that the proposed payment for about a third the medications included would fall below the acquisition cost. More troubling still, CMS’ initial timetable would not have given the states adequate time to adjust their reimbursement formula to ensure that it remained financially viable for pharmacies to fill scripts for Medicaid patients.

The latter issue became the immediate focal point for NACDS and other pharmacy groups involved in the decade-long struggle to establish fair Medicaid remuneration policies. For NACDS it was clear what course to take. The association immediately set about building a consensus among policy makers that to proceed with the CMS plan would very likely disrupt the Medicaid program in ways that would adversely impact health care delivery for beneficiaries.

“We engaged all 50 states and the District of Columbia to encourage them to look at their Medicaid reimbursement formula,” recalls Carol Kelly, senior vice president of government affairs and public policy at NACDS. “Many of them came back to us and said they would like to see the final rule before going to legislators, changing regulations, filing a state plan amendment or conducting a cost of dispensing study.”

Preoccupied with the rollout of the Affordable Care Act, most states were in no position to alter Medicaid reimbursement policies in accordance with the schedule envisioned by CMS.

“The way FULs work, they have historically related to product reimbursement,” Kelly says. “If there is going to be a reduction on that side of the ledger, pharmacy has to have adequate reimbursement for the cost of dispensing.”

The policy being advanced by CMS has broad implications, touching every aspect of the Medicaid prescription drug benefit. The extent of the impact will require states to take a holistic approach to ­implementation.

“The draft rule, which was published in early 2012, basically refocuses reimbursement for pharmacy services delivered to Medicaid beneficiaries for both branded and generic medications, as well as dispensing fees,” explains Kelly. “It’s a very large amount of change, and it didn’t make much sense to see it happen in a uncoordinated, disconnected manner. It would have been counterproductive to look at new FULs and impose those before examining the whole of what we’re trying to do with Medicaid reimbursement moving forward.”

NACDS stepped up its lobbying efforts in Washington and made the issue a priority on RxImpact Day in March, when chain pharmacy advocates from around the country met with representatives of 400 congressional offices. Those efforts, combined with input from other health care organizations, helped persuade 49 members of the House of Representatives and nine senators to send letters to Kathleen Sebelius, then secretary of Health and Human Services, asking that the states be granted a one-year transition period from the date the final rule on AMP-based FULs is issued.

“It really did make a difference that the pharmacy community expressed concern to legislators about Medicaid beneficiary access,” notes Kelly. “State Medicaid directors still need more nuts-and-bolts information about how to compute the new FULs in regard to the federal matching rate. Their Medicaid dollars from the federal government are dependent on getting implementation right.”

The postponement on the part of CMS is a victory for pharmacy and the Medicaid patients it serves, but more hard work lies ahead. The agency has been somewhat ambiguous about its revised plans for implementation, including the issuance of detailed guidance for states.
“We are fully committed to ensuring the ultimate outcome is positive,” Kelly says. “We’ll offer our input to CMS and continue to engage our supporters in Congress.”